Data from Glassnode indicated that Bitcoin has entered the „belief zone“ for the first time since July 2019, indicating that a bullish cycle is near.
Bitcoin (BTC) could be in the early phase of a new major upward cycle, a key metric chain October 27th suggests.
The dominant cryptomone has entered the „belief zone“, which historically marked the beginning of explosive rises.
According to Glassnode, the last time the Net Unrealized Profit/Loss (NUPL) reached the belief zone was in June 2019. In the following month, Bitcoin rose from about $7,500 to $13,868 by more than 80%.
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The Bitcoin NUPL at the top of your historical daily chart. Source: Glassnode
What is NUPL and why does it mean the beginning of a Bitcoin boom?
The NUPL metric essentially measures how many Bitcoin Fast Profit owners have profits or losses. If the metric goes up, it means that more investors are profitable since they bought BTC.
Glassnode researchers calculate the NUPL by evaluating the price of Bitcoin when you enter a new address.
Since a buyer needs to keep BTC in a new address, newly created addresses usually mean newly purchased BTC. The researchers explained:
„The number of UTXOs in profit/loss is calculated directly: We simply count all existing UTXOs whose price at the time of creation was lower or higher than the current price, respectively.
Currently, more than 50% of Bitcoin’s market capitalization is represented by unrealized profits. This means that the overwhelming majority of BTC’s owners and investors have profits.
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Although the metric could be interpreted negatively, because investors could start selling, historically, the NUPL would have to go up much more to signal a capitalization. Glassnode writes:
„Bitcoin investor sentiment: The net unrealized profit/loss (NUPL) has been in the ‚Belief‘ zone for the past week. Currently, over 50% of BTC’s market cap consists of unrealized gains, a level not seen since August 2019.
Throughout 2017, Bitcoin remained in the belief zone for an extended period, compared to the 2019 rally. There’s a possibility that an equally long accumulation phase could emerge in 2021 due to the post-halving cycle.
Analysts often attribute the 2017 rally to the post-halving cycle. In July 2016, Bitcoin experienced its second block reward halving. Because halving causes the rate at which the new BTC is being mined, it directly affects its supply. After one year of the halving, the BTC began to recover.
The last halving occurred in May 2020. If a similar pattern is assured, BTC could continue to rise through 2020 until the second half of 2021.
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The psychology of a market cycle and the belief zone. Source: TradingView.com
What analysts say about BTC’s short-term price trends
In the short term, analysts and traders expect the price of Bitcoin to retract in a healthy consolidation phase.
Santiment researchers said that social and chain metrics show worrying signs, possibly because BTC is overheating. They said:
„This weekend we were looking at the sustainability of BTC above USD 13,000. From now on, our social and chain metrics show more worrying signs than encouraging ones.
Unlike the 2017 surge, the current BTC rally has been more sustainable. It has established numerous important levels of support and resistance, which diminishes the possibilities of a massive correction.